Bank of England Divided on Continuing Stimulus Measures

LONDON — Policymakers at the Bank of England are divided over the future of their multibillion-pound program of bond purchases to stimulate the economy, according to minutes of their discussions released Wednesday, which suggests that prospects for an expansion of the program in the near term may be fading.

With the British economy likely to emerge from recession in the third quarter, but still facing extremely weak growth, many analysts had expected more stimulus in November.

But there is also growing sense that, with interest rates already at a record low, and the jury still out on the impact of the central bank’s asset purchases on the economy, monetary policy is becoming less effective as a means of stimulus.

Instead of central-bank stimulus measures, some economists favor a slowdown in the pace of large government spending cuts intended to cut the country’s budget deficit.

The bank’s policy makers also noted that consumer price inflation was still above the bank’s 2 percent annual target and probably would not decline this year, as had been hoped, because of rising energy and food costs. Economists note that inflation argues against an increase in stimulus, for fear of overheating the economy.

The release of the minutes coincided Wednesday with positive new data on jobs. Britain’s unemployment rate for June to August 2012 was 7.9 percent of the economically active population, down 0.2 percentage points from March to May 2012, according to the Office for National Statistics, an independent agency that prepares data for the government. There were 2.53 million unemployed people, down 50,000 from March to May 2012, the office said.

The record of the October meeting of the central bank’s Monetary Policy Committee showed that there was unanimous agreement to hold interest rates at a record low of 0.5 percent and not to expand the £375 billion, or $600 billion, purchasing plan, known as quantitative easing.

But the minutes also indicate that the debate on what to do at next month’s meeting will be finely balanced.

“There were some differences of view between members about the outlook and the likelihood that further easing in policy would be required,” the minutes said. “But there was agreement that there was little to be gained at this meeting in changing the current program of asset purchases.”

The bank minutes noted that consumer price inflation had fallen to 2.5 percent in August, from 2.6 percent in July, still slightly above the 2 percent target. “But higher oil prices and likely rises in domestic energy prices and some foodstuffs meant that inflation might remain broadly flat over the rest of the year, rather than gently falling as expected,” the minutes said.

Martin Weale, a member of the bank’s monetary policy committee, dampened expectations about more asset purchases last week when he said in an interview with the Daily Mail newspaper that it was “not self-evident” that “substantial extra support for the economy would be compatible with the inflation target.”

His comments, along with the labor report “provided some support for more hawkish members” of the central bank’s policy committee, Neville Hill, director of European economics at Credit Suisse, wrote in a note.

Rob Wood, chief U.K. economist for Berenberg Bank in London, said that the central bank’s position on continuing the stimulus would also depend on other signs of recovery in the economy.

“Productivity will be absolutely critical to the outcome of the committee’s November decision,” Mr. Wood said. “If productivity growth remains weak, there are limits to how much more monetary policy” can do “to boost growth without raising inflationary pressures.”